Fairborne Energy Ltd.

Fairborne Energy Ltd.

February 17, 2011 15:29 ET

Fairborne Enters Into Agreement to Sell Non Core Assets

CALGARY, ALBERTA--(Marketwire - Feb. 17, 2011) - Fairborne Energy Ltd. (TSX:FEL) ("Fairborne" or the "Company") has entered into a binding Purchase and Sale Agreement (the "Sale Agreement") for the sale of properties (the "Assets") in the Peace River Arch and Brazeau area of north and west central Alberta for $125 million, subject to closing adjustments. The sale is subject to customary closing conditions, including industry standard due diligence and regulatory approval, and is expected to close on or about March 22, 2011. Proceeds from the divestiture will be used to reduce bank indebtedness.

The Assets

Details of the Company's divested Assets are as follows:

  • Year-end 2009 reserves attributed to the Assets, based on Fairborne's independent reserve evaluation prepared by GLJ Petroleum Consultants Ltd, on a proved basis are 3.9 million boe and on a proved plus probable basis are 5.4 million boe (56 % natural gas and 44 % oil and NGL's)
  • Current production attributed to the Assets is approximately 1,830 boe/d (60% natural gas and 40% oil and NGL's)
  • Divestment metrics are approximately $32.05 per boe on a proved basis and $23.15 per boe on a proved plus probable basis and $68,300 on a flowing boe basis

Impact to Fairborne

  • Reduces net debt by 38%
  • Based on yesterday's closing price of $5.24
    • 26% premium to Fairborne's current enterprise value per flowing barrel valuation based on fourth quarter estimated average production of 16,000 boe per day
    • 84% premium to Fairborne's current enterprise value per proved plus probable reserves
    • Divested Assets represent 11% of 2010 exit volumes and proceeds represent 26% of current market capitalization

Updated guidance will be provided upon the closing of the transaction.

Fairborne is a crude oil and natural gas exploration, development and production company headquartered in Calgary, Alberta, Canada. Fairborne's common shares trade on the Toronto Stock Exchange under the symbol "FEL".

Forward-Looking Statements

Certain information set forth in this press release, contain forward-looking statements including management's assessment of future plans and operations, timing of completion of the sale of Assets and the use of proceeds therefrom. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Fairborne's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, delays resulting from or the inability to obtain required regulatory approvals, inability to retain and delays in retaining drilling rigs and other services, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions and ability to access sufficient capital from internal and external sources. The foregoing list is not exhaustive. Additional information on these and other risks that could affect Fairborne's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or at Fairborne's website (www.fairborne-energy.com). Closing of the sale of the Assets is subject to certain conditions set forth in the Sale Agreement some of which are beyond the control of Fairborne and closing could be delayed or may not occur as a result of non-satisfaction of such conditions. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The actual results, performance or achievement of Fairborne could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Fairborne will derive therefrom. Fairborne disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Barrels of Oil Equivalency

Natural gas volumes are converted to barrels of oil equivalent (boe) on the basis of 6,000 cubic feet (mcf) of gas for 1 barrel (bbl) of oil. The term "barrels of oil equivalent" may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Disclosure of Less Than All Reserves

The estimates of reserves for individual properties disclosed herein may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation.

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